the right way to invest blog

Here you’ll find DFA's Q4, 2019 Market Summary. Page 4 will show stock and bond market returns for major indices around the globe. You’ll see all green arrows for 1, 5, and 10-year returns. While we typically expect returns to be positive over 5 and especially 10 year returns and beyond, the very healthy positive returns we saw in 2019 should not be assumed to continue nor should be expected to be this robust year over year.

We can enjoy these strong returns and use opportunities to rebalance money from the outstanding market performers into the still positive but less performing areas of the stock market, and / or we could look to take some money off the table, if your portfolio objective allows for it. Ultimately, it is important to stay grounded and to not get too high with the highs, nor too low with the lows.

The final two pages tie in nicely into the idea of staying grounded and not getting too high (or low) in response to your portfolio’s performance. According to a recent survey by DFA, sense of security / peace of mind was the most popular answer when respondents were asked “How do you primarily measure the value received from your advisor?” Our job is to talk you off the ledge when returns are down…knowing those down days are temporary, and to keep you grounded when markets seem to be making new highs almost every day - knowing those days can be fickle, too and knowing today’s bull market can turn into tomorrow’s bear market.

Everybody has or knows someone who has a great market timing story. Their story might be a little exaggerated or embellished, but it’s probably mostly true…of course, you typically only hear the good stories and not the bad ones. Market timing is tough, very tough. It requires picking the right time to get into a stock and the right time to get out of a stock – it’s doubly hard to get it right both times.

For every share of a stock bought, there is a share sold. Typically, this buying and selling is done at an exchange. The combined effect of all this buying and selling is that all available information is quickly incorporated into a stock’s price. So, trying to time the market based on an article you read, a TV show you watched, a chart you analyzed, or what your neighbor said is likely to send you chasing after old news. If only we could stay ahead of old news.

But what about professional stock pickers? They’re professionals, so they must know more than us, or be correct more often, right? Unfortunately, that’s not the case. Check out the linked article to learn why.

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Michael Pensinger, CFP® is Owner and President of Pensinger Financial, Inc.

He grew up in Park Forest, Illinois and now resides in Lemont, Illinois with his wife, two children, and two dogs. Michael serves as Treasurer on the Lemont Area Chamber of Commerce Board of Directors and he volunteers for the Lemont Open Space Committee. Read More